This is the 3rd video of the Staying Out Of Trouble In China Chapter.

Today we shall discuss on a common misconception about Chinese law, which is whether the losing party pays for legal fees. I will tell you right now that the answer is generally speaking, no. We shall discuss why there is such a question, exceptions to this rule, and ways around this law regarding this issue.

According to wikipedia, the English rule provides that the losing party in court pays the other party’s legal costs. This contrasts with the American rule, under which each party is generally responsible for their own attorney fees. If you have watched my last video on how German law and Chinese law are similar, you will be surprised to find out that Germany also follows the UK rule here. 

Legal fees are further broken down into court fees and attorney fees. In China, the party that hires the lawyer pays for the lawyer, while the standard rule for court fees is that these are borne by the losing party. For your information, court fees are the fees that the court charges to take on the case. There is one exception here, which is labour arbitration. There are no arbitration fees for labour arbitration. Attorney fees are the fees you get charged by your lawyer that includes legal consultation, case preparation, case filing, representing you in court, travelling expenses, printing fees and so on and so forth.

Having this in mind, we go onto the exception regarding attorney fees here. For cases brought to China International Economic and Trade Arbitration Commission, in short the CIETAC, the losing party bears all legal costs. This Arbitration Commission has over a dozen of branches all over China, and their arbitration fees are generally much more expensive than court fees, which is at least double of what a court charges. As arbitration is one big topic on it’s own, I will explain more about arbitration in future videos. 

Therefore, one simple way to get the losing party to pay for legal fees is to mutually agree to solve disputes in international arbitration instead of the court in contract. Another way to get the losing party to pay for legal fees is to add such a clause in the contract. The court will respect the mutual decision made by both parties, and grant such a request. This is also a good way to find out whether the other party that you are going to sign a contract is trustworthy, as people who intend to back down after a deal is made will probably refuse to sign such a contract.

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